European ETFs attracted asset inflows of USD56bn to reach more than EUR227bn – a gain of over 30 per cent – in 2010, according to the latest SPDR ETFs report from State Street Global Advisors.
The report notes that during the year, ETF investors concentrated their new investments in several asset classes, most notably emerging market equity, commodities, US, German and Japanese equity, as well as Euro government bonds.
ETFs that provide investors with exposure to changes in the VIX – a popular proxy for US equity market risk – also attracted significant assets. Outflows were concentrated in euro zone ETFs, reflecting investor unease about the sovereign debt crisis.
Looking forward to 2011, the report suggest that Continued growth of ETF assets is to be expected as the search for diversification continues. There will also be greater globalisation of European portfolios and demand for high dividend ETFs is also expected.
In addition, the trend for investors to have more global portfolios will increase, with an increasing proportion of assets being invested in non-correlated asset classes such as emerging market equity and bonds. With government bond interest rates near historic lows and cash rates at virtually zero, investors have been starved of income in portfolios.
Another trend expected to continue in 2011 is increased investment in ETFs that focus on high dividend-paying stocks. Investors have become more interested in ‘getting paid while they wait’ than counting on capital appreciation. Dividend ETFs offer the potential for capturing much of the upside of traditional equities as well as higher yields.
